Bloomberg:
- Merkel Economy Shows Neglect as Sick Man Concern Returns. German Chancellor Angela Merkel’s economic machine is beginning to show signs of neglect. As the continent’s growth engine and self-appointed fiscal paragon orders budget cuts for its peers, investors, economists and policy makers are starting to warn Germany is turning a blind eye to its own weaknesses. Joerg Asmussen, a European Central Bank board member nominated by Merkel, has gone as far as to predict a return to the status of “Sick Man of Europe” should they go unfixed. Without Merkel and a largely supportive German electorate ready to back over 300 billion euros ($393 billion) in bailouts and guarantees, Europe’s debt crisis could have already broken up the single currency. At the same time, the drive to rescue Europe has distracted her from signs of economic drift at home as labor costs rise at the fastest pace in a decade, erasing most of the progress made under predecessor Gerhard Schroeder.
- U.K. Wage Growth Slows to 21-Month Low as Spending Power Falls. Take-home pay growth at Britain’s largest publicly traded companies slowed to the least in 21 months in the fourth quarter, reducing Britons’ spending power, VocaLink Ltd. said. Incomes after tax and other deductions rose 0.4 percent from a year earlier, compared with 0.9 percent in the three months through November, the London-based group said in a statement today.
- Facebook(FB), Google(GOOG) May Face More Data-Use Limits, EU Lawmaker Says. Facebook Inc. (FB), Google Inc. (GOOG) and Microsoft Corp. (MSFT) may face stricter privacy rules requiring them to let users shift data to rivals in the European Union under proposed changes to a draft law.
- China-Japan Dispute Takes Rising Toll of Top Asian Economies. The last time a dispute between Japan and China blew up in 2010 over eight uninhabited islands, the economic fallout lasted less than a month. This time, the spat is prolonging a recession in the world’s third-largest economy. Four months after Chinese consumers staged a boycott of Japanese products over the islands in the East China Sea, sales of Japanese autos in China have yet to recover, Chinese factories began to favor South Korean component suppliers, and the U.S. has displaced China as Japan’s largest export market. “The spats have become increasingly costly as Japan’s dependence on China as an export market has risen,” said Tony Nash, a Singapore-based managing director at IHS Inc., which provides research and analytics for industries including financial companies. “Nationalism around the issue has resulted in lower demand for Japanese products in China and even Chinese firms sourcing products from Korean suppliers.”
- Japan Defense Ministry Seeks 212 Billion Yen Amid Island Dispute. Japan’s Defense Ministry requested 212 billion yen ($2.4 billion) in Prime Minister Shinzo Abe’s stimulus package, as the country seeks to maintain control of islands also claimed by an increasingly assertive China. Included in the request are funds for extra PAC-3 missile interceptors and upgrades for F-15 fighter planes, according to a document distributed by the ministry. Abe, who vowed to boost funding for the military and coast guard upon taking office last month, will finalize on Jan. 11 about 12 trillion yen in extra spending for the year ending in March.
- Obama Green Fleet Shows Ford Loses to Hyundai Hybrids. President Barack Obama’s administration, which set a goal of buying only alternative- technology vehicles for its fleet by 2015, cut purchases of hybrid and electric models by one-third last year and bought mostly Asian brands. About 54 percent of the 1,801 alt-fuel vehicles purchased by U.S. government agencies last year were built by Hyundai Motor Co. (005380), Toyota Motor Corp. (7203), Mitsubishi Motors Corp. (7211) and Honda Motor Co., according to data obtained under a Freedom of Information request from the U.S. General Services Administration, which coordinates most vehicle purchases.
- Dimon Says Some JPMorgan(JPM) Execs ‘Acted Like Children’ on Loss. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said some top executives at the largest U.S. bank “acted like children” in handling an errant derivatives bet that cost the company more than $6.2 billion last year. “Instead of helping, they were running around with their head chopped off, ‘what does this mean for me personally, how’s my reputation?’” Dimon, 56, said yesterday at a conference in San Francisco hosted by the New York-based bank. Some people “felt they could take advantage of it personally, they were willing to hurt the company by maneuvering.”
- Obama Weighs Leaving No Troops in Afghanistan After 2014. President Barack Obama is considering leaving no U.S. troops in Afghanistan after 2014, White House officials said today, emphasizing Obama’s range of options as Afghan President Hamid Karzai arrives in Washington for talks. “I’d say that would be an option we would consider,” Ben Rhodes, the deputy national security adviser, told reporters on a conference call when asked if the Obama administration is considering withdrawing all troops after 2014. Obama “does not view these negotiations as having the goal of keeping U.S. troops in Afghanistan,” he said.
- Apple(AAPL) Said to Develop Cheaper IPhone Model for Late 2013. Apple Inc. plans to sell a smaller, cheaper version of the iPhone as soon as this year, said a person familiar with the plans, part of a push to gain customers in developing nations. Apple, which had been working on a more affordable smartphone since at least February 2011, is weighing retail prices of $99 to $149 for a device that would debut in late 2013, at the earliest, according to the person, who asked not to be named because the negotiations are private. Apple has spoken to at least one of the top U.S. wireless carriers about its plans, the person said.
- Chavez Won’t Take Oath This Week as Foes Warn of Anarchy. Ailing Venezuelan President Hugo Chavez won’t be sworn in for a new term this week, plunging the nation into an institutional crisis that opposition leaders warn could result in “anarchy.”
- Challenges Grow for Nominees. Opponents Strategize to Block Confirmation of Picks for Top Pentagon, CIA Posts. Challenges mounted Tuesday to President Barack Obama's nominees to lead the Defense Department and the Central Intelligence Agency, though it remained unclear whether opposition would grow strong enough to block their confirmation. Sen. Lindsey Graham (R., S.C.) said John Brennan shouldn't be confirmed to lead the CIA until the administration provides details of how it came to supply conflicting information about the terrorist attack in Benghazi, Libya, last year that killed four Americans. "I do not believe we should confirm anyone as director of the CIA until our questions are answered," he said.
- Button-Down Central Bank Bets It All. Switzerland, for decades a paragon of safety in finance, is engaged in a high-risk strategy to protect its export-driven economy, literally betting the bank in a fight to contain the prices of Swiss products sold abroad. The nation's central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland's total national output, and, in the process, turning from button-down conservative to the globe's biggest risk-taker.
- Fresh Jet Glitches Bedevil Boeing(BA). Boeing Co.'s flagship Dreamliner jet, plagued by years of production delays before getting off the ground, hit fresh trouble Tuesday as air-safety officials opened a formal probe into a fire that broke out on an empty plane, and another airline discovered wiring problems in one of its 787s.
- Finra to Shine Light on Dark Pool Trading. A top U.S. regulator plans to shine a light on dark pools, private trading venues that allow buyers and sellers to post orders that are hidden from the rest of the market. Richard Ketchum, chief executive of the Financial Industry Regulatory Authority, said in an interview Tuesday that the regulator is expanding its oversight of the dark-trading venues, with an eye on whether orders placed in public exchanges are "trying to move prices or encourage sellers that may advance their trading in the dark market."
- Dish(DISH) Bids for Clearwire(CLWR). Offer for Wireless Broadband Provider Challenges Pact Cemented With Sprint.
- Frederick and Kimberly Kagan: How to Waste a Decade in Afghanistan. Leaving a bare-bones U.S. presence will risk a return of the Taliban—and civil war. Administration officials are already leaking that the U.S. presence will be smaller than that requested by Gen. John Allen. The U.S. commander in the region has said that a force of 6,000 to 20,000 troops is needed. The White House has floated that 3,000 to 4,000 may be sufficient. The divergence mirrors a more general disjunction in U.S. policy and perceptions regarding Afghanistan. Americans think the war is going badly, and many think it is hopelessly lost. But the Obama administration says that the process of "transitioning" responsibility for security to the Afghan military is going well enough to justify dramatic reductions in American forces this year and after 2014.
- A year of stagnation continued in 2013: Andy Xie. Both developed and emerging economies will see lower growth.
- US Pumps Up Oil Output, Big Gains Seen for 2013. The growing role of the U.S. as a major energy producer is changing the dynamic of the energy market. U.S. oil production continues to accelerate at a surprising rate, and the government now predicts the U.S. industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in U.S. production to the point where the U.S. is expected to surpass Saudi Arabia in crude production by 2020, according to U.S. government statistics.
Business Insider:
NY Times:
Brookings:- Bank Hacks Were Work of Iranians, Officials Say. The attackers hit one American bank after the next. As in so many previous attacks, dozens of online banking sites slowed, hiccupped or ground to a halt before recovering several minutes later.
The Blaze:
Reuters:
- Alcoa(AA) sees brighter 2013, but remains cautious. Alcoa Inc, the largest aluminum producer in the U.S., expressed cautious optimism that demand for the metal will continue to grow in 2013, helped in part by global growth in the aerospace and construction markets. The company posted a fourth-quarter profit on Tuesday, in line with Wall Street expectations, and handily beat expectations on revenue, helping calm investors' nerves after a rocky 2012. "I'm more optimistic that 2013 is a year with upside potential compared to where we came from," Alcoa Chief Executive Klaus Kleinfeld told CNBC on Tuesday. Shares of Alcoa rose 1.3 percent in after-hours trading, as investors were buoyed by Alcoa's turn to profit.
- Fortress(FIG) buys into Chinese bad debts - FT. Fortress Investment Group is buying a servicer of bad debts and assets in China as it bets on a expected surge of non-performing loans in the country, the Financial Times reported on Wednesday. Fan Ya Tai was set up to help creditors maximise recoveries from loans to companies and property owners. Its clients include Chinese and foreign lenders such as Bank of America Merrill Lynch, the newspaper said. The newspaper, citing people familiar with the deal, said the deal to buy Guangzhou-based Fan Ya Tai was small but would help Fortress gain insight into corporate China and the property market.
- Illinois again fails to act on pensions, risking credit downgrade. The Illinois legislature adjourned on Tuesday without acting to restore the health of the nation's most underfunded state pension systems, risking another downgrade of its already low credit ratings.
- Goldman(GS), Morgan Stanley(MS) to also settle on foreclosures -sources. Goldman Sachs Group Inc and Morgan Stanley are expected to agree as soon as this week to a $1.5 billion settlement with federal regulators over botched foreclosure claims, two sources familiar with the matter said on Tuesday.
- Fed's Lacker warns inflation could pick up next year. The Federal Reserve's latest stimulus plan will not do much to boost growth and raises the risk of inflation next year, Richmond Fed Bank President Jeffrey Lacker said on Tuesday, echoing remarks he made last week.
- Brussels fears 'poverty trap' for half of Europe as North-South gap widens. Unemployment in the eurozone jumped to a record high of 11.8pc in November as the region slid deeper into recession, with alarming rises across the Mediterranean that threaten extreme social distress.
- Multilateral trade deals are dead, says French industry minister Arnaud Montebourg. Multilateral trade deals are "dead", France's industry minister has said, professing a preference for bilateral accords as the 27-nation European Union and the US prepare to begin talks on removing tariffs.
- Eurozone debt crisis: unemployment 'shockingly bad' - IoD. Eurozone unemployment is "shockingly bad" as it hits a record high of 11.8pc in November, the Institute of Directors said.
- The governments of Hesse and Bavaria will meet Feb. 5 to decide to dispute Germany's state finances system in the country's highest court, citing Volker Bouffier and Horst Seehofer, prime ministers of the two states as saying. Bavaria decided in July to seek changes to the redistribution system and press for weaker states to cut debt and spending.
- Germany's opposition SPD opposes Cyprus rescue plan in current form, citing interview with Sigmar Gabriel, party chairman. German Chancellor Angela Merkel is at risk of not having a parliamentary majority for planned measures.
- The 'old days' of China being bullied are over, according to a commentary on the island dispute with Japan. China is capable of safeguarding its territorial sovereignty and the "old days" of the nation being bullied by others are gone forever. Japan "must stop the illegal action" of repeatedly sending its ships and aircraft to the disputed islands in the East China Sea. China doesn't accept Japan's protest over its surveillance ships that approached the islands, the commentary said.
- Foreign banks operating in China have halted lending to the steel trading, nonferrous metals and commodity wholesale industries, citing a foreign bank executive. Foreign banks have already stopped loans to the luxury product, lottery and hotel industries.
- None of note
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.5 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 81.0 +2.75 basis points.
- FTSE-100 futures +.22%.
- S&P 500 futures +.09%.
- NASDAQ 100 futures +.09%.
Earnings of Note
Company/Estimate
- (AZZ)/.61
- (STZ)/.55
- (TXI)/-.31
- (RT)/-.06
- (PSMT)/.62
- (GBX)/.30
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a -1,112,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,500,000 barrels versus a +2,569,000 barrel gain the prior week. Distillate supplies are estimated to rise by +1,900,000 barrels versus a +4,574,000 barrel rise the prior week.
- None of note
- The China inflation/industrial production/retail sales data, 10Y T-Note auction and the MBA weekly mortgage applications report could also impact trading today.